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Which short duration bond fund?
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NPH
Posted: 28 February 2025 15:23:10(UTC)
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For the last couple of years my defensive cash buffer has been RLMM. Very safe and 5% return, why take more risk?
But now interest rates are finally starting to fall, is it time to consider moving beyond a cash proxy into (still) highly defensive bond fund? I am looking at short dated, as I am no bond expert and the market seems very volatile.
One of the challenges of fund selection is the categorisation seems to vary between MM and bonds, but I do like the look of Royal London Short Term Fixed Interest.
All thoughts gratefully received.
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OmegaMale
Posted: 28 February 2025 15:46:33(UTC)
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M&G Short Dated Corporate Bond I Inc

4.96% yield and 0.25% charge is on my short list

OM
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NPH on 28/02/2025(UTC), Strauss on 28/02/2025(UTC), Jed Mires on 28/02/2025(UTC), AlanT on 02/03/2025(UTC), Phil 2 on 04/03/2025(UTC)
ANDREW FOSTER
Posted: 28 February 2025 15:53:22(UTC)
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I'm currently about 10% in RL Short Term Fixed Income and very happy with it as a 'base line' plodder.

It slightly outperforms RL Short Term Money Market.

There are similar funds with marginally lower performance, I suspect mainly driven by slightly higher charges.

If you want something a bit more risque but higher returns then look at M&G Floating Rate HIgh Yield.

Again a fairly solid plodder but at maybe 8-9% current rate. Note that it is GBP hedged which I place a value on ATM. Just be aware that it has occaisional one day spikes in price so if putting a sum in I tend to spread it over a few days.

RL also do RL Global Bond Opportunities worth a look unhedged.

Note: When looking at the charts/performance for these, just look at the one year initially, since that cover the era of "higher interest rates" but the behaviour should continue for a while yet.

P.S. Not sure interest rates really are heading down ATM as inflation stoking is at work in the USA
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5 users thanked ANDREW FOSTER for this post.
Strauss on 28/02/2025(UTC), Shetland on 28/02/2025(UTC), D Bergman on 28/02/2025(UTC), AlanT on 02/03/2025(UTC), Phil 2 on 04/03/2025(UTC)
NPH
Posted: 28 February 2025 16:03:00(UTC)
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ANDREW FOSTER;336087 wrote:

I'm currently about 10% in RL Short Term Fixed Income and very happy with it as a 'base line' plodder.

It slightly outperforms RL Short Term Money Market.

There are similar funds with marginally lower performance, I suspect mainly driven by slightly higher charges.

If you want something a bit more risque but higher returns then look at M&G Floating Rate HIgh Yield.

Again a fairly solid plodder but at maybe 8-9% current rate. Note that it is GBP hedged which I place a value on ATM. Just be aware that it has occaisional one day spikes in price so if putting a sum in I tend to spread it over a few days.

RL also do RL Global Bond Opportunities worth a look unhedged.

Note: When looking at the charts/performance for these, just look at the one year initially, since that cover the era of "higher interest rates" but the behaviour should continue for a while yet.

P.S. Not sure interest rates really are heading down ATM as inflation stoking is at work in the USA


Thanks very much. I'd be totally happy with 5% after fees and I agree about interest rates which is why I'm not touching anything else bond-wise.
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Andrew59
Posted: 28 February 2025 16:08:59(UTC)
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RLSTMMF is still yielding in the high 4's.

I guess it depends on your view of the future direction of interest rates.
Are they really coming down any time soon?

I guess the hypothesis is that as the UK struggles interest rates will be lowered to improve the chances of growth.

Conversely, if you look at the constituents of the inflation figures it's the service sector that (I'll led to believe) is the biggest concern. CPI services inflation rose from 4.4 to 5% and unless they can get that under control inflation will stay above target. That could delay any interest rate cuts.

Unlike the Fed, the BoE remit is only 'achieve an inflation target of 2%' - nothing related to unemployment specifically.
The Fed has a dual mandate.

But I take your point and maybe need to cast an eye over a few none-MM alternatives.
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ANDREW FOSTER
Posted: 28 February 2025 16:33:24(UTC)
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Andrew59;336090 wrote:


I guess it depends on your view of the future direction of interest rates.
Are they really coming down any time soon?

I guess the hypothesis is that as the UK struggles interest rates will be lowered to improve the chances of growth.

Conversely, if you look at the constituents of the inflation figures it's the service sector that (I'll led to believe) is the biggest concern. CPI services inflation rose from 4.4 to 5% and unless they can get that under control inflation will stay above target. That could delay any interest rate cuts.

Unlike the Fed, the BoE remit is only 'achieve an inflation target of 2%' - nothing related to unemployment specifically.
The Fed has a dual mandate.

But I take your point and maybe need to cast an eye over a few none-MM alternatives.


My view is that if Trump pushes ahead with infaltionary policies (lower tax, high tariffs) then the inevitable result will be hgiher Fed rates for longer, possibly even upwards. That will suck money to the USA and damage the UK forex rates, resulting in inflation here.

That, in turn, puts upwards pressure on UK rates, irrespective of any recession here.

But it's all very finger in the air and why I split my corporate bond funds roughly equally between hedged and unhedged and I'm happy to steer that split according to the direction of the wind.

Currently I'm not feeling another UK base rate cut in March...
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3 users thanked ANDREW FOSTER for this post.
NPH on 28/02/2025(UTC), Andrew59 on 28/02/2025(UTC), Phil 2 on 04/03/2025(UTC)
Wave Action
Posted: 28 February 2025 16:53:57(UTC)
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Phil 2 on 04/03/2025(UTC)
Fin Man V
Posted: 28 February 2025 18:20:15(UTC)
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NPH

I started a thread on ERNS 10 months ago and there may be some useful information on there ....

ERNS - iShares Ultrashort Bond

We now have 12.7% of our portfolio in ERNS, I still like it and the performance stands up well to MMFs

Context

- I hold a decent slug of short duration stuff for a potential house purchase in 2028 (alongside various MMFs and Gilts)

- I hold ERNS on Hargreaves Lansdown and am through the fee caps for ETFs etc so it is free to hold there, well the marginal cost is £0
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3 users thanked Fin Man V for this post.
NPH on 28/02/2025(UTC), ANDREW FOSTER on 28/02/2025(UTC), Andrew59 on 02/03/2025(UTC)
Dunno
Posted: 28 February 2025 20:39:21(UTC)
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I have my cash in a mix of RL ST MMF, Fixed Income and Enhanced Fixed Income, with a bit in Aegon High Yield Bond to kick it all beyond 6%… doing ok for now
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4 users thanked Dunno for this post.
NPH on 28/02/2025(UTC), ANDREW FOSTER on 28/02/2025(UTC), malc1111 on 01/03/2025(UTC), Andrew59 on 02/03/2025(UTC)
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